Business Taxes for Small Business Owners in Singapore

December 3, 2014 | Sharon Cheong

There are many tax breaks and incentives for foreign-owned small businesses and corporations in Singapore. The country also has one of the most efficient tax regimes in the world, along with an extremely transparent regulatory environment.

Tackling Double Taxation in Singapore

As far as foreign income is concerned, Singapore has a unique territorial tax system that taxes on a remittance basis. Singapore also eliminates the possibility of double taxation through a foreign tax credit for taxes provision.

Back in June 1, 2003, the Foreign-Sourced Income Exemption Regime was introduced to Singapore foreign tax credit administration for businesses. This serves as another means for easing tax accreditation issues from double taxation.

The Foreign-Sourced Income Exemption Regime

Singapore-derived income of foreign-owned companies is taxed at a 17% flat rate. The rates have been kept at that low level because Singapore wants to encourage investments and uphold a positive international business environment.

A Startup Tax Exemption Scheme was created back in 2004 to encourage entrepreneurship among international businessmen. It aims to offer newly incorporated companies some exemptions when it comes to their taxable profits during the first three years of their operation.

Other Information about Foreign SMB Taxation

Small- and medium-sized businesses or enterprises are recognized by the Singaporean government as essential to ensuring that Singapore's vibrant economy continues to thrive. This is why they offer SMBs and SMEs with partial tax exemption schemes.

Furthermore, the scheme also lowers the taxable profits of such businesses, allowing them to take home more profit and ensure that they continuously operate without being bogged down by excessive taxation, which is rampant in other countries. This exemption is available for all companies, but it's particularly beneficial to SMEs.

Facilitation of Risk-Taking and Entrepreneurial Activities with Tax

The Singaporean government has also instituted the loss transfer system of group relief for the sake of managing entrepreneurial and risk-taking activities commonly seen by burgeoning startups and businesses.

Under this system, current-year non-utilized losses, unabsorbed capital allowances, and donations of related companies and subsidiaries can be transferred to related companies within the group, thus relieving the overall tax burden of a given conglomerate of businesses.

In summary, Singapore has one of the most open and foreign-SMB-friendly tax schemes, which is an effective incentive for foreign investments to keep flowing in.

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